META-ECONOMICS OF COVER CROPS

Transcription

1 META-ECONOMICS OF COVER CROPS Paul D. Mitchell Agricultural and Applied Economics, UW-Madison Science of Cover Crops Madison, WI March 14, 2014

2 What is Meta-Economics? The Economics of Cover Crops Start by putting a dollar value estimate to some benefits of cover crops The Meta-Economics of Cover Crops The Economics of the Economics of Cover Crops Deeper and broader economic principles that drive human behavior relative to cover crops

3 Cover Crop Benefits Reduced soil erosion Nutrient capture and release for crop use Additional forage Suppression of weeds, insects, pathogens Improved soil health

4 What is the Value of a Ton of Soil? Suppose you prevent some soil erosion, what s it worth? Hansen and Ribaudo (2008) Economic Measures of Soil Conservation Benefits: Regional Values for Policy Assessment USDA ERS TB 1922 Lit review, multiple impacts, by county for policy analysis Irrigation ditches & canals, Recreational fishing, Freshwater & marine fisheries, Flood damages, Road drainage ditches, Municipal & industrial water use, Municipal water treatment, Steam power plants, Soil productivity, Dust cleaning, Water-based recreation, Navigation, Reservoir services Lower bound on value of eroded/saved soil

5 Benefit in WI ranges from $8.81 to $6.57/ton $1.21/ton of this is for Soil Productivity Fairly constant across WI counties

6 Soil Erosion: Farmer Cost Farmer s direct cost as Soil Productivity Loss = $1.21/ton In 1990 dollars, so convert to current dollars using CPI: $1.21 x 1.79 = $2.17/ton annually Wisconsin state average soil loss is 4.6 tons/a in 2007 (Google Soil Erosion on Cropland 2007 NRCS ) $2.17/ton x 4.6 ton/a = $9.98/A annually Soil erosion costs WI farmers on average about $10/A in lost productivity each year Maximum average erosion reduction benefits cover crops can generate for farmers if they completely eliminated soil erosion

7 Cover Crops and Nitrogen How much N do cover crops immobilize for follow crops? Gabriel et al. (2013), 5-year study in Spain, cover crops before corn, estimated probability functions Very skewed, with lots of low values, fewer high values Mode = 12 kg/ha Vetch Barley Mode = 22 kg/ha Mean = 82 kg/ha Median = 35 kg/ha Mean = 64 kg/ha Median = 39 kg/ha

8 Cover Crops and Nitrogen Just because a cover crop immobilizes N does not mean the follow crop gets it! Depends on cover crop termination method, soil temperature and moisture, timing relative to the major uptake period of the follow crop, cover crop species, Gabriel et al. (2013): average uptake rate by corn 90% for barley 81% for vetch 65% for rapeseed Some cover crops consume soil N as they decompose Ruark and Stute: Cover Crop Considerations for 2012

9 Cover Crops and Nitrogen UW Extension, Ruark and Stute: N credits vary by cover crop species, size and planting date Can credit about 40 lbs N per acre, sometimes more Enough N to justify the cost? N Price N Value at 40 lbs/a N Value at 60 lbs/a $0.35/lb $14 $21 $0.40/lb $16 $24 $0.45/lb $18 $27 $0.50/lb $20 $30

10 Benefits of Cover Crops: Forage Early season rye forage before plant corn silage Affects quantity and quality of following corn silage crop Shelley, West & Ruark No-till continuous corn silage compared to Corn silage with rye cover crop Corn silage with rye forage crop $59/A $233/A Net gain as extra milk produced ($/A) relative to continuous corn silage; pay for seed, planting, herbicide, extra forage harvest, additional nutrients removed

11 Cover Crops and Soil Moisture Cover crop X crop X environment X management interactions matter: Sometimes worse off with cover crops Cover crops use soil moisture, which is good in wet years and heavy soils, but bad in dry years and lighter soils 2012 drought year versus 2013 wet spring Rye cover crop harvested May 10, corn planted in both areas same day Cover crop used soil moisture in a year that it mattered (2012) Same effect if were cover cropping for 20 years??? Cover Crop 6/29/2012 No Cover Crop Columbia County

12 Yield and Cover Crops Vetch Mean = 13.5 bu/a Barley Mean = 5.3 bu/a Rapeseed Mean = 3.5 bu/a Yield Decrease Fallow Yield Increase Yield kg DM ha -1 Gabriel et al. (2013)

13 Benefits of Cover Crops: Yield Bergtold et al. (2012) survey of 300 Alabama farmers 67% had used cover crop in last three years 37% of adopters perceived a yield benefit (63% did not) Of those perceiving a benefit, average benefit was 12.8% across crops Average of the negative benefits was??? Average over all outcomes =??? Average of the positive benefits was 12.8%

14 Economics of Cover Crops Net Benefit = Price x Extra Yield Extra Costs Is the yield increase on average enough to justify the cover crop cost? To justify the risk? Is the N cost savings enough to justify the yield risk? Depends on your costs and your willingness and capacity to bear risk, how much you discount the future, and your value from the non-monetary benefits of cover crops Probability Cover crops are not a sure bet, but are they a good bet? Net Benefits

15 Costs, Benefits and the Human Condition A common issue underlying many human problems Pay high costs now, wait a long time before benefits become apparent and eventually exceed costs Switch costs and benefits: Benefits large now and high costs not paid until the future Add the variability and it becomes even more unclear: Good or bad outcomes due to luck or your choices? Costs Money How Much? Benefits How Big? Time How Long?

16 Survey of WI Organic Vegetable Growers (Moore et al. In Review) Let s look at organic vegetable growers as a group of Good Farmers who generally use cover crops 2014 survey, 152 responses Size range ¼ acre to 2,100 acres Mean of 36 acres, Median of 4 acres Farm revenue from vegetables: Median of 78% Median of 7 different vegetable crops Top 3 vegetable crops account for a median of 73% of their acreage

17 Responses By County Cover Crop Adoption 78% planted cover crops in % for part of the season 61% for the full season 14% planted cover crops, just not in 2013 An average of 40% of their cultivated acreage

18 Adoption Rapidly Increased in the 2000s % of Respondents % of Respondents Planting Cover Crops Year

19 Most growers use cover crops on their organic vegetable acres About 1/3 use on a few of their acres About 1/3 use on some of their acres About 1/3 use on most of their acres Use of cover crops does not carry over to their other acres

20 A diverse portfolio, but rye dominates Wheat Vetch Turnip Radish Sorghum Ryegrass Rye Peas Oats Clover Buckwheat Barley Alfalfa % of Respondents % Use every year % Use some years

21 % of Respondents On-farm diversity is variable # of Species Planted

22 What challenges were the most important impediments? Direct costs, managerial costs and opportunity costs 1. Seed expense 2. Extra time to manage 3. Short planting window 4. Management difficulty 5. Special equipment 6. Decreased income if it replaces a cash crop

23 Meta-Economics of Cover Crops Cost Matters for Cover Crop Adoption, A Lot Cost share is and will continue to be an important driver for adoption Even among farmers who believe in cover crops Direct costs, managerial costs, and opportunity costs Expect cover crop dis-adoption by grain farmers due to current tight margins

24 Meta-Economics of Cover Crops Cover Crops are Risky Cover crops are not a sure bet, but they can be a good bet Sometimes cover crops make farmers worse off Are good outcomes due to good luck or good practices? We need honest statements and assessments of the benefits and risks to manage farmer expectations and to maintain legitimacy/credibility Probability Net Benefits

25 Meta-Economics of Cover Crops Cover Crops are an Investment Immediate costs, risky and uncertain long-term benefits This investment does not have a guaranteed payoff Find long-term users to show benefits, to inspire and maintain long-term investments by farmers Costs Money How Much? Benefits How Big? Time How Long?

26 Meta-Economics of Cover Crops Cover Crops are Idiosyncratic and Diverse Success depends on the specifics of each farmer, each farm, each field and each year Too diverse for a simple rule or research program Use of a one-size-fits-all rule will always be second best Too many research questions to answer Farmers need to do their own research to figure out what works for them on their farm Species, timing, management practices, Find low cost, simple and locally relevant practices Rules should be as flexible as they can be

27 Meta-Economics of Cover Crops Widespread and Highly Intense Adoption is Unlikely Organic vegetable farmers do not do so Cover crops would have to become a requirement NOP, Conservation Compliance, EU CAP Institutions Matter Crop insurance rules Rental arrangements: Could use example leases that require and/or reward good cover crop use

28 Thanks for Your Attention! Questions? Paul D. Mitchell Agricultural and Applied Economics University of Wisconsin, Madison, WI Follow me on

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30 Farmer Respondent's Education Graduate Degree 19% 4-year College Degree 2-year 25% College Degree 4% Some High School 27% Some College 18% High School or GED 7%

31 Cover Cropping Challenges

32 Cover Cropping Benefits SOIL AND WEEDS

33 Soil Erosion: Social Cost Most of the costs of soil erosion (benefits of soil erosion reduction) are off site: public or others pay the costs or get the benefits Off site costs $5.36 to $7.60/ton x 1.79 x 4.6 = $44 to $63/A (convert to 2015 $ and $/A) x 6 million corn + soy acres in 2015 $265 to $375 million/year Add another $60 million for farmer benefits Maximum amount we should spend annually to eliminate soil erosion in Wisconsin to have cost:benefit ratio less than one

34 Cover Crops and Nitrogen Cover crops immobilizes N for follow crops: How much? Wide ranges that vary based on the type of soil, weather, cover crop species, management, etc. Cornell Agronomy Extension Fact Sheet 43 Nitrogen Benefits of Winter Cover Crops Cereals can immobilize 50 lbs N/A Legumes can immobilize 100 lbs N/A 50% of hairy vetch studies found >70 lbs N/A 80% of hairy vetch studies found >50 lbs N/A Cereal rye often showed negative effect likely from high C:N in cover crop residue Main Point: N benefit of cover crops is variable